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Is there no saving Korea's display industry? The display industry, which was once a bright spot in Korea's IT sector along with semiconductors, has fallen on hard times. The makers of LCD and plasma screens, the two main categories in the industry, are struggling after a sudden drop in prices. The plasma business is especially hurting as plasma screens are lagging LCDs in the large digital TV market.
¡ß Plasma business in decline
Korea's top plasma screen makers, LG Electronics and Samsung SDI, both reported bad news recently. LG Electronics said it called in management consultants McKinsey to go over its plasma business, and an LG executive said the company will "adjust plasma supplies and other business strategies" according to the results of McKinsey's survey at the end of the month. In other words, they are planning to restructure their business, which is in a serious slump. Some experts predict that with the plasma business posting big losses and losing out to LCD displays, LG may sell off their whole plasma unit.
Meanwhile, Samsung SDI, Korea's leading plasma screen maker, called in the Samsung Strategic Planning Office for a business diagnosis of its own last month. SDI's operating profit fell by 58 percent last year, part of a general worsening in results over the last two years, and that's got the Samsung Group worried. Counter to expectations that SDI's plasma business would soar, sales for 2006 fell to W1.57 trillion (US$1=W932) from W1.74 trillion in 2005.
¡ß As prices fall, plasma loses out to LCD
The reason for the depressed results is that prices for plasma screens have fallen by more than 50 percent in less than two years. And as plasma continues to lose out to LCDs, the depression is accelerating. Consumers are buying more LCD TVs instead of plasma TVs, so digital TV makers keep pace by increasing their production of LCD units instead of plasma units.
Of the total number of digital flat screens made by LG Electronics in 2005, 36.2 percent were plasma TVs, but the company plans to reduce that rate to 23 percent this year. Samsung Electronics, which buys plasma screens from Samsung SDI, plans to lower its output of plasma TVs to 18.5 percent this year from 27.3 percent in 2005.
¡ß LCD also struggling with price collapse
Even though LCD screens have taken the lead in the digital TV market, the LCD business is also hurting from a similar fall in prices. Prices for LCD screens for TVs fell by nearly 50 percent last year, and prices for LCDs for monitors fell by more than 30 percent. LG.Philips LCD is due to announce its results this week and experts are predicting serious losses.
No Keun-chang, an analyst with Korea Investment & Securities said, "As competition in digital TV prices between businesses in America and other countries increases, the pressure on prices in the display industry will get worse. Those companies that have the most power to reduce costs will survive as the winners."
(englishnews@chosun.com )
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